Japan's retail accelerate as investors favor US markets

The 2025 retail sales were at a ten-year high despite high domestic market acquisitions in Japan

ContentsJapan’s retail sales rise despite strong equity performanceOverseas investment demand stays near record levelsYen pressure builds as rate gaps persistShareholders were still pouring money abroad, which indicated a strong belief in US markets. The Investment Trusts Association and Japan Exchange Group indicated that there were continued selling during November

The trend was notable because Japanese equities gave good returns throughout the year.

Japan’s retail sales rise despite strong equity performance

The Japanese retail investors sold 3.8 trillion in local shares and equity funds as of November 2025 through net sales. This is approximately equivalent to 24.3 billion in present exchange rates.

The sale was carried out although the Topix index increased by approximately 25% in the year. The rally was one of the most positive events in the performance of Japanese equities in recent years.

The corporate earnings were maintained, and growth-oriented policies were retained under Prime Minister Sanae Takaichi. In spite of such circumstances, domestic equity exposure was decreased among households.

The Topix was also the first time in yen that it performed better than the S and P 500. Nevertheless, the trend of retail flows still shifted to stocks out of the country.

Overseas investment demand stays near record levels

However, domestic selling grew, and the purchases of overseas assets remained robust. Purchase of foreign securities via investment trusts would reach almost 9.4 trillion.

That number remained near the record of 2024. The undervalued yen enhanced gains on foreign assets converted into the domestic currency.

Japanese retail investors continued to have the US markets as a major target. Trust in US growth remained steady ahead of the second term of President Donald Trump.

The move towards foreign equities was assisted by the tax-free NISA. The overseas accounts have made it easy and more appealing to households in the context of investment.

The outflows were described by Bank of America strategist Adarsh Sinha as unprecedented. He claimed that the trend made the yen weaker than it would have fallen otherwise.

Yen pressure builds as rate gaps persist

The continuous outflow of funds burdened the currency of Japan. There was also a strain on the yen due to the increase in the rates of the Bank of Japan and increased government expenditure.

The yield on the ten-year government bond issued by Japan is approximately two percentage points lower than the US Treasuries. The yields, adjusted to inflation, also remain negative.

JPMorgan and BNP Paribas project that the yen will reach 160 per dollar by the end of 2026. Structural yield gaps were mentioned by analysts as the primary driver.

The markets of the region were higher than during the post-holiday break. The futures of the Nikkei in Japan were on the way to an increase, and South Korea’s KOSPI, on the other hand, had a steep gain.

Hideyuki Ishiguro, the Nomura strategist, had warned of heavy exposure in the US stock market. He claimed that high technology appraisals might increase risks and urged that there should be increased diversification.

A distinct change in household investment behavior is mentioned in the retail sales in Japan. The high domestic returns did not succeed in reversing the preference towards foreign assets.